Investors are focused on a lot of things when it comes to the performance of their rental homes, but perhaps the most important metric is ROI, or Return on Investment. Understanding your returns will help you make decisions, adjust your investment goals, and acquire your next property.
We’re focusing today on the ROI involved in single-family investment homes. The Greenville market provides an outstanding opportunity for owners who want to achieve attractive returns. Single-family homes in local neighborhoods offer a chance for investors to increase cash flow, diversify real estate investment portfolios, and create extra equity that can’t always be found in multi-family or commercial investments.
One of the key factors in securing a strong return on investment is making sure your purchase your investment property in an area that is desirable and growing. Location plays a huge part in your ROI. Fortunately, Greenville is the perfect area to capitalize on a single-family investment property and increase both cash flow and long term ROI. We have some great neighborhoods and well-maintained communities, and both those things are required for any kind of positive return.
How to Calculate and Evaluate Your ROI
You’ll need to know the math when you’re calculating your ROI, and different people use different equations. But on average, most experts agree that anything above an 8 percent gain is something to celebrate. It’s a good return on investment, and often achievable on single-family homes in Greenville.
Every investor is unique and so are every investor’s goals. Your rental property will earn and perform differently than other rental properties. This means that your scale of success will be yours alone. As long as your real estate investment is making money and not losing money, you can feel pretty good about renting out a home that is potentially earning cash flow and growing in value.
How to Determine if You’re Earning Good Returns
You know you’re earning money when your ROI is climbing, but it can be difficult to follow your progress when you’re balancing rental income with the expenses required to manage and maintain your home. Follow your formula. Typically, the first step in calculating your return on investment is to calculate your annual rental income. Perhaps you’re renting out a property for $1,200 per month or $14,400 annually. That’s your income.
Next, you then want to subtract all the expenditures required of your rental property. This would include your fixed expenses like mortgage payments, taxes, insurance, and any HOA or condo fees. Then, there are other variable costs to consider like maintenance and vacancy. The number that remains gives you a general idea of what you’re earning in cash flow. That’s going to contribute to your ROI but remember what really matters is that you’re gaining equity from year to year and at the same time, your asset is appreciating in value.
Greenville Property Management and ROI
Understanding ROI on your single-family investment property is important when you own it, when you’re thinking of selling it, and even before you buy it. If you’ve identified an investment opportunity in Greenville, talk to a property manager so you understand the home’s potential rental income and the expenses that may be required to rent it out. This will help you estimate the ROI on a single-family home before you buy it.
Traditionally, the ROI earned on single-family homes is better for investors who are interested in long term returns. While multi-family properties might bring in more rent and protect owners against vacancy, they don’t produce the same returns as single-family properties.
If you’d like to hear more about investing in Greenville rental properties, please contact us at Letts Property Management.